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So whereâ€™s the deflation which Bank of England governor Mervyn King is so desperate to avoid?

...Whatâ€™s evident from Kingâ€™s opening statement to the Treasury Committeeâ€™s hearing on inflation, however, is that the central bank is still relying on something called `the output gapâ€˜ in estimating inflation/deflation risk â€” despite having mentioned in July that the monetary policy committee might have overestimated the amount of `slackâ€™, or spare capacity, in the economy already.